Bull vs. Bear: TRON | Bankless

Dear Bankless Nation,

Few ecosystems are as controversial as Justin Sun’s TRON. The L1 platform holds a host of converts and haters, both with a good amount of ammo for their arguments.

Today, we present you with the bull and bear cases for the ecosystem, where Bankless researchers James Trautman and Jack Inabinet take opposite sides of the debate over the future and fortunes of TRON and the TRX token.

– Bankless team

Are you Bullish or Bearish on TRON and its TRX native token? Not sure?

Today, the Bankless analyst team digs into the controversial L1 ecosystem and attempts to pull out whether there’s opportunity or disaster awaiting investors. Agree or disagree? Take it to the comments!

Let’s kick things off with the bear case…

🧸 Bear Case

TRON’s primary function is to enrich its insiders, and participating in this zero-sum game is a mistake that you will invariably regret.

A case-in-point example of the type of insider baseball that occurs in the ecosystem was presented in a March lawsuit filed by the SEC against Justin Sun, the TRON Foundation, and two entities related to BitTorrent – another Sun-supported project.

The suit alleges that over 600k in wash trades were fraudulently placed on Sun-controlled exchanges to mislead investors into believing there was an active market for TRON’s TRX and BitTorrent’s BTT. As part of this scheme, Sun also paid celebrities like Jake Paul and Lindsay Lohan (who failed to disclose they were compensated) to shill the token to their followers.

TRON’s TVL has certainly been the envy of its competitors, with over $6.7B locked across its various smart contracts, making it the second largest chain by TVL behind Ethereum, but it comes with a high degree of concentration risk.

While nearly 3M unique smart contracts exist on the TRON, 99.9% of this TVL belongs to three protocols controlled by Justin Sun: JustLend, JustStables, and SUN!

To make matters worse, much of this TVL is controlled by a small number of wallets, presenting a risk that a liquidity crisis could ensue on the chain should a single whale suddenly withdraw their funds. While lenders have supplied $2.8B BTC to JustLend, 98.7% of it comes from just three wallets!

Concentration risk is even higher in JustLend’s stUSDT market, where 99.7% of the $1.3B in supplied assets are from a single wallet.

Further aggravating the stUSDT situation are the blatant misrepresentations of how stablecoin deposits are utilized; an examination of the onchain stUSDT flows reveals that its RWA label is entirely inaccurate!

Instead of burning stablecoin deposits, activity one would expect to see if the stables were actually facilitating the purchase of RWAs, deposits into the stUSDT contract are transferred to Justin Sun’s personal wallets to prop up JustLend or recycled through exchanges, like Huobi and Binance to maintain the peg of TUSD (a Justin Sun controlled stablecoin).

Indeed, it appears that those holding stUSDT are simply in possession of a Justin Sun IOU, which provides little guarantee that the underlying Tethers will be there when they attempt to redeem the instrument.

The discovery is sounding the alarm among institutional traders who now have good reason to be concerned about Huobi’s solvency, seeing as 14% of users’ deposits are reserved by the token.

If you want to live on a chain wrought with fraud and deception, then TRON just might be the one for you! It is important to keep in mind, however, that despite the illusion of activity and prosperity, TRON appears to be little more than a ghost chain whose only real use cases seem to be serving as a private DeFi platform for Justin Sun. Should this whale run into trouble, the situation is likely to become bleak for TRON.

– Jack Inabinet

🐂 Bull Case